Question

Stolton and Bright are partners in a business they started two years ago. The partnership agreement states that Stolton should receive a salary allowance of $15,000 and that Bright should receive a $20,000 salary allowance. Any remaining income or loss is to be shared equally. Determine each partner’s share of the current year’s net income of $52,000.

Answer 1

Share of Stolton is $23,500

Share of Bright is $28,500

Step-by-step explanation:

The present net income amounts to $52,000, from which the Stolton (S) will receive $15,000 as the salary allowance whereas the Bright (B) will receive $20,000 as a salary allowance.

So, the balance amount is:

Balance amount = Present Net income - Salary allowance of Stolton - Salary allowance of Bright

= $52,000 - $15,000 - $20,000

= $17,000

This remaining balance is to be shared equally among the S and B. So, the amount will be $8,500 per partner.

The aggregate amount would be:

S = $15,000 + $8,500

= $23,500

B = $20,000 + $8,500

= $28,500

Answer 2

$23,500 for Stolton and $28,500 for Bright

Step-by-step explanation:

The partners agreed to allocate the profit based on the salaries given to the partners and divide the excess equally.

Stolton Bright Total

Salary 15,000 20,000 35,000

Excess 8,500 8,500 17,000

TOTAL 23,500 28,500 52,000

The salary allowances agreed by the partners must be given first to the partners and any excess will be divided equally. In case, the salary exceeds the net income for the period, the loss will be divided same as the ratio of the profit.